Aaron Hoos

This blog post is the fifth in a series called Sales Funnel Paygates – a strategic look at where in the sales funnel your payment transactions can be placed. (See the introductory blog post in this series for more information).

SALES FUNNEL PAYGATE: AFTER DELIVERY
This paygate occurs after your customer has received delivery of the product or service you sell. (Note the green paygate in the sales funnel, pictured below).

This is a classic B2B model: Businesses that sell to other businesses might convert their business contact into a customer, deliver the product or service later, and then invoice the client after delivery.

This paygate model is also seen frequently in the B2C world, too. You see it in utilities like power, water, cable, telephone, internet, and credit cards. And you see it in services like car repair, medical services, plumbers, electricians, accountants, etc.

Why would a customer prefer this paygate? Business customers like this model because it allows them to first acquire the things they need to conduct business in order to earn enough money to pay for those purchases. For business customers, it’s all about generating cash flow first. Consumers may prefer this model because they can own and enjoy the service first and delay the pain of purchase until later.

Regardless of whether you are a B2B or B2C business, if you use this paygate model, you run the risk of having receivables. Some businesses accept receivables (and the work they can take to collect, and the inevitable losses that come with it) as a cost of doing business. But receivables can be a costly — and even dangerous — part of your business. If you aren’t used to working with receivables or you don’t like doing it, this paygate model might not be right for you.

Why would a business prefer this paygate? Businesses that sell to other businesses will find this paygate model can help them make more sales. That’s because their B2B customers may not keep a lot of cash on hand but they are willing to cut a check later after they’ve received money from their customers. Businesses that sell to consumers might prefer this model because they can’t charge a fixed price up-front. Perhaps they have use-based fees and need to first deliver to know how much to charge.

Like other paygate models that delay payment, businesses like this model because it reduces the barrier to purchasing. Lots of customers (especially consumers but also business customers) want to own the product or service and will decide later how to pay. They don’t have to have the money when they convert or when they receive delivery, thus they can own the product or enjoy the service without worrying about the money. This “buy now, pay later” method helps to increase sales.

A critical part of every sales funnel is the conversion of prospects into customers.

It takes work to convert your prospects into customers: There are the intense marketing efforts needed to compete in the marketplace, as well as the preliminary research and prospect-qualifying efforts. But when it comes time to pitch and close the deal, the biggest obstacle is objections that your customers raise. You’ve probably heard your fair share of them: Price, speed, quality, prior vendor commitments, upper management approvals, you name it. These are sales killers. Piles of books have been written about this topic.

HOW SHOULD YOUR BUSINESS HANDLE OBJECTIONS?
Rather than facing the possibility of objections with dread, embrace objections like collectable sports cards. Collect objections like they’re going to be worth millions someday (because they could be).

Start by sitting down with your sales team (or with a coffee if you happen to be the sales team, CEO, and janitor all rolled into one busy person) and listing all of the objections you’ve heard in the past. Some of them will be common, others will be rare, and others could be ridiculous. Write them down. Write each objection on its own 3×5 recipe card.

Then, brainstorm the answers. Yes, answers – plural. Try to come up with as many answers as you can for each objection. Write them on the same recipe card.

Soon, you’ll have a big pile of objections and answers. Review them regularly. Use them as flashcards. Pin up the most confounding objections and work tirelessly at adding responses to them. Sometimes you’ll need to hunt down data, and sometimes you might have to actually retool part of your business processes in order to effectively resolve an objection.
Then, jump back into your sales funnel with confidence: You’ll either meet each objection head on, or you’ll hear a new objection that you can go back to the office and add to your recipe card collection. Dare your prospects (without actually explicitly daring them, of course) to give an objection that you haven’t heard before.

DON’T STOP THERE
Don’t wait for your objections to be raised by your customers. Address them earlier in your sales funnel through marketing and through prospect qualification. Embed the objection-countering answers into your presentations and brochures and blogs. Casually counter potential objections while building rapport.

OBJECTIONS ARE AWESOME
Objections can stop sales cold. But if you shift how you think of objections – thinking of them as something valuable to be collected, rather than something annoying to avoid – you’ll create an arsenal of objection-countering that can help you close more sales.

In your business’ sales funnel, every stage (lead, prospect, customer, etc.) has its own goal. Moving a contact from one stage to the next is about working with the contact to achieve each goal, in order.

Here are some ways that you can convert a prospect into a customer, depending on your organization type and business model.

You will convert a prospect into a customer when your contact…

• Pays you for a product or service that they subsequently receive (i.e. consulting services)
• Orders a product that they subsequently pay for (i.e. a retail model)
• Becomes a member (i.e. in a club)
• Shows up
• Agrees (i.e. in an argument)
• Shows up for an appointment (i.e. in a health services situation)
• Subscribes (i.e. to a publication)
• Enrolls (i.e. to a class)
• Invests (i.e. in a real estate model)
• Deposits money (i.e. in a financial services model)
• Signs on the dotted line

You’ll notice that the customer doesn’t necessarily have to pay. They simply have to commit. At this point in the relationship, you are no longer trying to convince them to buy from you. Rather, you have their commitment and are now delivering your offer and/or requesting payment.

Even though you delivered a flawless sales pitch, you handled every objection with finesse, you are the most competitively priced option around, and the prospect has a clear need for your product or service, they might still say “no”.

It can be frustrating for entrepreneurs who are trying to make a sale when they encounter this kind of resistance. It’s simply not logical. All the signs point to a sale and yet the prospect doesn’t make that one final leap.

The reason could lie in something called “Prospect Theory”, a concept developed by Kahneman and Tversky in 1979. Prospect Theory describes how people respond to an anticipated outcome.

PROSPECT THEORY IN SALES
According to the Prospect Theory, your prospects may not be buying from you because the fear they have of losing something outweighs the positive feelings they have of gaining something. (Yeah, you might need to read that sentence again).

Let’s consider a theoretical example where a prospect has the opportunity to buy something from you for $100 and you show them how your offering can easily double that amount, earning them $100 quickly.

Conceptually, it sounds risk free. But Prospect Theory shows us that your prospect is thinking differently. The grid below shows the anticipated outcome of loss or gain on the horizontal line, as well as the prospect’s sense of value as a result of the outcome along the vertical line.

Now let’s imagine that you’ve pitched them and told them about your $100 product that will earn $100 for your prospect right away. In your prospect’s mind, there are two possible outcomes: They could gain that $100 (shown in green) or they could lose the $100 (shown in red).

One would expect that the prospect would be just as happy to gain $100 when your product pays for itself as they would be sad to lose the $100 if you turned out to be a scam artist selling them snake oil. But that’s not the case. It’s not an equal amount of joy and pain or good sense of value and bad sense of value.

Rather, Kahneman and Tversky showed that the following is the case: People fear a loss to a greater degree than they look forward to an equivalent gain. In our example: Your customer fears losing $100 far more than they look forward to gaining $100. In other words, your prospect may be fairly happy to gain $100 on the sale but he or she will be extremely upset to lose the $100.

By increasing their sense of positive value and by decreasing their sense of negative value, you are addressing their natural instinct to fear a loss.

And that can help lead to a sale.

WHAT DOES THIS MEAN FOR YOUR SALES EFFORTS?
In short, the gain needs to far outweigh the loss. You can’t just talk about earning money back or doubling. It needs to be greater. Think of the lottery: If people paid $10 for a ticket and had a chance to win $10 back, they probably wouldn’t play. But the “pain” of a $10 loss (or more, in many cases) is far outweighed by the tremendously large payout. So build a giant list of benefits. Sit down with your team and create as many benefits as you can. Make them highly detailed, multisensory, and meaningful to your prospect.

At the same time, look to reduce their fear. Build credibility. Show proof that your product works. Show testimonials and case studies of satisfied customers. Have a serious, attention-getting guarantee. Minimize their sense of loss.

NEXT TIME YOU’RE OUT SELLING
The next time you’re out selling, remember the Prospect Theory and use it to guide your sales pitch: Load your presentation up with as many benefits as you can think of and tip the scales in your favor by increasing your prospect’s positive sense of gain and decreasing their negative sense of loss.

Before your customer buys from you, they want to know that the product or service they are getting will actually provide value to them.

Although the above is true (and you can read it in any sales textbook), customers rarely put it into those terms. They don’t sit down with all of your sales literature and try to figure out if your product or service “provides value”.

HERE’S HOW BUYING REALLY WORKS
By the time someone gets to the prospect stage in your sales funnel, they are thinking about your offering in fairly vague terms within a much larger list of competitors’ offerings. The process of moving your prospect from the prospect stage to the customer stage is about getting them to see your offering as the only one for them.

So, how do you do that?

Every prospect has a mental checklist of elements that the product or service must contain or perform, and that mental checklist also includes qualities that the vendor must possess. These are largely unspoken — even unarticulated in the prospect’s mind — but they are very real. And in order for you to sell successfully, you must assure (and prove) to your prospect that you and your offering fulfill the items on their mental checklist.

Some of the things your prospect will have in their buying checklist are:

• Will the product or service do what I want it to?
• Will it suck?
• Will the company try to rip me off?
• Can I afford the product or service?
• Will the company deliver?
• Will I get the product or service on time?

Along with some of these questions, your prospect might have additional hot button issues like:

• Is the product environmentally friendly?
• Is the product fairly traded?
• Is the product safe for my children?

If you want to be successful at selling your products and services, you need to figure out what your customer’s mental buying checklist is and then you need to answer each point in their checklist.

HOW TO KNOW WHAT THEIR BUYING CHECKLIST IS
In general, the prospects in the market you serve should have fairly similar checklists. However, they won’t be exactly the same and they will prioritize their checklists differently. Here are some other ways you can find out what’s on your prospect’s checklist:

• Ask them to talk about their own business. Listen to what they highlight as being important to them. If they provide rapid delivery, you can be sure that they will need a vendor with rapid delivery.
• Listen for the questions they ask before and during your sales presentation.
• Listen to the objections they make. Those are huge indicators of what is important to them. (And remember what you’ve learned and apply it to the next prospect).

HOW TO ANSWER EACH POINT IN THEIR CHECKLIST
Prospects will only buy once you have answered each point in their checklist. But don’t start the conversation by overwhelming them with checklist answers. You’ll need to build trust first. And, as you build trust, you can start to include checklist answers. Your literature should also address some of the most important checklist items. Verbal assurances are important, and sometimes that will be enough, but sometimes customers need proof, too. Provide proof in your sales literature and on your website.

The prospect stage of your sales funnel is the point at which your contacts consider whether or not your offering will meet their needs. They do that with an unspoken checklist that you need to discern and address in order to make the sale.